The pros and cons of niching
Niching is almost always the right answer, but as Amanda C Watts explains, you have to approach it in the right way.
I read a recent post in Any Answers about marketing and finding new work with great interest. The firm owner started off in a niche, which worked well and is the preferred direction of the firm.
However, taking on two sizeable general practice clients - who now account for more than a third of the practice’s income - has tempted them to expand and become more generalist.
The poster was asking for advice on whether to seek out more general practice clients or stick to their original niche market.
The answers were diverse, ranging from “focus on your niche” to “get as many clients as you can no matter who they are”.
As a practitioner, you come across many kinds of clients. Some are good and some are bad (I call them vampire clients). Some pay you well and some make you feel like they get far too much bang for their buck.
However, one thing always runs true. You can choose the kind of clients you want to work with. The control is in your hands.
Let's look at the pros and cons of niching
Cons of a niche practice
- Risk of dependence on a single market or offering a single service
- Likely to attract competition if successful (everyone will want what you have got)
- Vulnerable to market changes – if you have all your eggs in one basket the chosen niche may suffer economic or environmental difficulties (one of my clients services businesses who want to get into China – this is not a very lucrative venture at the moment with the current coronavirus outbreak).
Pros of a niche practice
That being said the Pros outweigh the Cons tenfold.
- Less competition – you will be a big fish in a little pond and you can position yourself as the expert.
- Speed of success – it takes much less time to gain marketing traction when you have a niche as there is no wastage with your marketing
- Speak the language of your clients – each niche has a specific language that, when used by a niche marketer, gets attention and is not overlooked and lost in the white noise.
- More lucrative – you can often charge a higher price for work when you are working as a niche practice. You are seen as an expert and people will pay handsomely for your expertise.
- Specialist knowledge – as a niche practice you will have a PHD in your clients’ problems and how to overcome them. You will be one step ahead of the client most of the time and this will enable you to be seen as remarkable.
- Profit margins are higher because you have systems in place to be more efficient. If you are doing the same kind of work again and again, you can systemise your work.
- Your app stack is tight. Working with the same kind of clients means they need the same kinds of apps. This saves you time and money and means you can become highly skilled in using a few great apps vs overwhelmed using all apps available.
- Clients are more loyal – because you are the go-to niche expert, Clients will tend to be more loyal as there is less reason to go to your competitor.
You can see that there are certainly more pros than cons when it comes to niching and there have been some great success examples of niche marketing to attract ideal clients.
The problem is that the poster’s current niche do not pay as much as their generalist clients (although they are more profitable). So there are two solutions:
- Choose a different niche to target that will invest more in accounting services (but stay niche so that you can systemise and optimise your service)
- Get better at marketing to the current niche and scale with client volume rather than income per client.
Both of these solutions require one thing: the ability to get clients. No matter what stage you are in business - start-up, first few years, established - your job as a firm owner is to get and keep a client. Which is why having a lead generation system is essential. Referral marketing (hope marketing as I call it) just doesn't cut the mustard when it comes to getting your ideal clients flooding through your doors.
A lead generation campaign needs to be made up of purposeful specific steps and you need to optimise each stage of the campaign to maximise the success of it.
Step One: Attract ideal clients towards you. To do this you need to know who is an ideal client and where your ideal client is hanging out, so that you can get in front of them.
Step Two: Once you are visible to a potential new client you must build a relationship with them. 70% of a prospect’s buying decision is made before they even reach out to enquire about working with you. This means you have to create content and share valuable insights to position you as a vital accountant. You can do this on social media, but most importantly you must build a prospect database that belongs to your firm.
Step Three: Convert a prospect into a high paying client. You will need to master a couple of things here to really benefit from potential opportunities. First you need to be clear on your offering and pricing. Secondly you need to know how to sell high value services. Anyone can sell cheap compliance – it’s why you close most of your leads. But selling high value advisory requires more skill and relationship building.
Once you have a system in place to get high-value clients in a chosen niche that you serve exceptionally well, questions like the one from Any Answers will not be asked by your firm.
Having a niche is good for your firm. If you have the opportunity to niche (which you do, it's just a mindset shift) then grab the opportunity and run with it.
Having a marketing and sales campaign to attract the right clients is a necessity if you want control over the growth of your firm and you want to escape the “hope marketing” trap.
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Amanda C. Watts gives sales and marketing superpowers to accounting firms.
She noticed that accounting firms were being overlooked, compliance based and decaying, and that commoditisation is their Kryptonite.
When Amanda is not out sharing her superpowers, she is a speaker, entrepreneur, Amazon best-seller and the author of The...